What Is the Bandwagon Effect?
The bandwagon effect is the tendency to do something because others are doing it. In markets it fuels
bubbles and panics.
The bias
You buy because everyone else is, the crowd
must surely be right.
The reality
Crowds are most confident, and most wrong,
at the extremes.
Measuring the bandwagon is the whole point of a sentiment index.
Source: CFGI
Markets